Bank finance versus bond finance
By: Fiorella De Fiore, Harald Uhlig
Contributors: Uhlig, Harald, 1922-; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16979; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16979.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems.  The model is used to analyze some major long-run differences in corporate finance between the US and the euro area.  We suggest an explanation of those differences based on information availability.  Our model replicates the data when the euro area is characterized by limited availability of public information about corporate credit risk relative to the US, and when european firms value more than US firms the flexibility and information acquisition role provided by banks"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/30/2011.

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